Republican presidential nominee and former U.S. President Donald Trump takes the stage following early results from the 2024 U.S. presidential election in Palm Beach County Convention Center, in West Palm Beach, Florida, U.S., November 6, 2024. REUTERS/Callaghan O’Hare
Financial Market Outlook under a Trump Presidency
Currencies A renewed Trump presidency is expected to strengthen the U.S. dollar, as analysts predict his policies will drive inflation and growth higher than projections under Kamala Harris. This anticipated economic activity would likely keep the Federal Reserve’s rates elevated, enhancing the dollar’s appeal. In contrast, Trump’s proposed tariffs and increased defense costs for allies may slow growth globally, bolstering the dollar further. Citi analysts forecast a potential 3% dollar rally. European currencies, such as the euro, could decline, possibly below parity with the dollar, and China’s yuan may weaken as it did from 2018 to 2020. The Swiss franc, while under pressure, may find some resilience due to Switzerland’s high-value exports and its strength during inflationary periods. Bitcoin, buoyed by anticipated leniency on crypto regulations, reached record highs as markets reacted.
Stocks Trump’s proposed tax cuts, reduced regulations, and policies supporting fossil fuels signal growth for U.S. equities, especially in banking, technology, defense, and energy sectors. A Goldman Sachs estimate suggests that his corporate tax cut from 21% to 15% could elevate S&P 500 earnings by about 4%. However, protectionist policies and a firm stance on China may impact multinational corporations by increasing costs and reducing profitability. Sectors exposed to trade dynamics, including semiconductors, autos, and clean energy, may face volatility. Outside the U.S., a stronger dollar and trade uncertainties could weigh on European and Japanese stocks, especially in auto and tech industries.
Bonds Trump’s fiscal plans could add an estimated $7.5 trillion to U.S. deficits over the next decade, likely raising borrowing costs and Treasury yields. The October bond market reaction, which saw yields increase by nearly 50 basis points, underscores investor caution regarding U.S. debt. Inflationary pressures from Trump’s policies may limit the Fed’s ability to lower rates, keeping yields high. Global yields are also expected to rise, as higher inflation limits central banks’ flexibility abroad. Analysts project additional strain on currencies like the euro, yen, and Swiss franc.
Commodities Trump’s strategy to increase oil and gas production, including federal leasing and regulatory rollbacks, could stabilize U.S. crude prices, despite recent market declines. Stricter sanctions on Iran and a proposal to bolster the Strategic Petroleum Reserve could support prices by reducing supply. Agricultural commodities such as soybeans are sensitive to potential trade tensions with China, where exports have already declined by 25% year-over-year due to limited compliance with prior trade agreements.
Emerging Markets Emerging economies may face challenges under Trump’s policies. His proposal of tariffs, including a 200% duty on Mexican auto imports, could weaken the peso and other currencies like South Africa’s rand and Brazil’s real. A strong dollar and rising U.S. yields might trigger capital outflows from emerging markets. Some nations, such as India or Chile, with unique domestic growth stories or valuable exports like copper, could find relative stability.
Sustainable Investing Trump’s commitment to roll back environmental regulations may benefit traditional energy sectors, while his intention to rescind unspent Inflation Reduction Act funds could impact clean energy investments. His proposal to replace SEC Chair Gary Gensler could diminish the ability of sustainable funds to influence corporate policy, making these funds less attractive to investors amid fluctuating energy prices.
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